Is the CMO and agency relationship at risk?

11:21 AM, 13 September 2018

The future of the agency model

The brand-agency relationship is going through a shake up. A recent WFA study has found that three quarters of major multinationals are rethinking their current agency arrangements, with many addressing whether their current partners have the right capabilities for their needs.

In response to their apparent dissatisfaction with agencies, many brands are moving towards an in-house model, feeling the pressure of ad budgets, while consultancies swoop in to take high-margin experience technology services.

Despite the shift to in-house models, 82% of of advertisers in the same study don’t foresee a world without agencies. But what’s coming clear is that brands are asking agencies to adapt to the changing advertising landscape, in both their creative capabilities and media approach.

“We are dealing with a fundamental shift in the way consumers behave and how they access media. Advertisers need to take the lead in developing a new kind of partnership if they truly want to achieve one to one marketing at scale. That requires new skills but also involves working closely with their agencies, which often have huge knowledge about the companies they work with.”

- Roel de Vries, Corporate VP, Global Head of Marketing, Communications and Brand Strategy, Nissan

How might agencies adapt?

In order to move with this shift, the WFA suggests agencies need to look to new business models that adapt to today's business requirements and put the client at the centre.

When rethinking their model, relationships and capabilities, CMOs are increasingly asking agencies to:

  • Stay at the cutting edge. Many brands are urging agencies to leverage the best of what is available and revitalise their internal structures to stay at the cutting edge in the changing advertising landscape.

    To do this, CMOs are asking their agencies to deliver new ideas and work that isn't hindered by their internal P&Ls or Holding Company arrangements.

  • Maintain trust and transparency. Remaining at the core of the agency model should be a commitment to openness, trust and transparency.

    Brands want to use this as the foundation of their agency relationships, only then can opportunities of seamless working and partnership be achieved.

    Transparency is also important when it comes to data. Backed by the WFA's Online Manifesto for Data Transparency, brands are looking for agencies to uphold the highest standard of privacy for consumer data to ensure trust is maintained.

  • Elevate new services and adapt their creativity. Brands are wanting agencies to move away from the traditional narrative that creates suspense and reveals the brand at the end.

    In response to audience's shorter attention spans and new digital advertising opportunities, agencies are asked to embrace a storytelling approach that puts the brand at the front of the story.

  • Embrace a data-driven approach. Agencies need to embrace a data-driven approach and move away from the old model built on relationships and buying inventory at scale.

    Many CMOs have pointed out that technical aspects of digital media that they're getting from their agencies (such as frequency capping, CPMs and viewability) are often found in be incorrect. Because of this, more brands are looking to do more in-house, such as building databases, analytics and expanding insight capabilities.

What does this mean for the future agency model in New Zealand?

Advertisers and agencies in New Zealand are not isolated by this same disruption. While local scale means some of these trends, such as the emergence of consultant companies into the advertising sector may be trailing the rest of the world, the nature of global or regional business ownership, both on the client and agency side, means we can’t be separated from these trends.

Of course, we need to respect the needs of agencies to be profitable businesses, but there is also need for agency models to adapt, to be more flexible. The whole sector needs to have a conversation about agency compensation, going right back to the question of what do clients need and aligning these outcomes to remuneration.

At ANZA we will keep our Members up to date on how this issue evolves around the world. In the meantime, let’s schedule a meeting to discuss how you are approaching the question of agency servicing, so we can achieve more effective advertising outcomes.

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